RBI's Revolving Credit Curb on NBFCs Explained

Imagine you have a loan account that works a bit like a credit card. The bank sanctions you, say, ₹2 lakh. You draw ₹50,000 for a phone, repay it over a few months, and the moment you do, that ₹50,000 is available to borrow again — no fresh paperwork, no new approval. Tap, repay, tap again. Convenient, right?

Millions of Indians love exactly this kind of loan. And on August 6, 2026, the RBI floated a draft rule that could largely switch it off — a proposal so consequential that Bajaj Finance stock fell nearly 6% in a single session, and the broader Bajaj group shed close to ₹55,000 crore in market value before lunch.

What exactly did the RBI propose?

The draft says that most NBFCs (non-banking financial companies — the lenders that aren't full-fledged banks) should offer only term loans: a fixed amount, a fixed repayment schedule, and — this is the crucial part — once you repay, that limit does not get restored. You can't keep redrawing against the same line.

In other words, the RBI wants to curb revolving credit at NBFCs — the flexi, draw-repay-redraw products. The one big exception: NBFCs that issue actual credit cards would still be allowed to offer revolving credit. Everyone else would be nudged towards plain-vanilla term loans.

Why is the RBI doing this?

The regulator's worry is about hidden risk. Revolving credit is convenient, but it can quietly trap borrowers in a cycle of perpetual debt — a bit like paying only the minimum due on a credit card forever. When a limit keeps refreshing, some borrowers never actually get out of debt; they just keep rolling it over.

The RBI also likes loans with clear, predictable repayment — it makes the health of a lender's book easier to read. Flexi products, where balances constantly move up and down, are harder to monitor for stress. Tightening this is part of the RBI's broader, ongoing push to keep unsecured retail lending from overheating.

Why the market panicked

Here's where it gets specific. Bajaj Finance is the country's largest private-sector NBFC — and it happens to have the biggest exposure to exactly these flexi-credit products. By some estimates, around 15% of its consolidated assets and close to 20% of its standalone loan book are linked to products the draft could affect.

So when a rule threatens a chunk of your bread-and-butter business, investors react fast. That's the ₹55,000 crore wipeout in a nutshell. Other NBFCs with flexi-loan offerings wobbled too.

Markets don't wait for the final rulebook. The mere draft of a regulation can move tens of thousands of crores in an afternoon.

Who wins, who loses

Potentially hurt: NBFCs heavily reliant on revolving/flexi products — they may have to redesign offerings, and could lose some of the fee and interest income these loans generate.

Relatively shielded: Banks (governed by their own rules) and NBFCs that issue credit cards, which are carved out of the proposal. Term-loan-focused lenders barely feel it.

Borrowers: a mixed bag. You might lose a genuinely handy product — the flexi line that let you dip in and out. But you're also less likely to be nudged into a never-ending debt loop. For disciplined borrowers it's a small loss of convenience; for vulnerable ones, it's a guardrail.

This is a draft — not law yet

Crucial caveat: this is a draft proposal, not a final rule. The RBI has invited industry feedback until August 28, 2026, and the final guidelines could look softer, tougher, or differently phased. Companies will lobby, tweaks will happen, and the eventual version may carve out more exceptions. So today's stock reaction is really the market pricing in a risk, not reacting to a done deal.

What it means for you

If you use a flexi loan from an NBFC, nothing changes overnight — existing rules still apply while the draft is debated. But it's a good moment to understand your own borrowing. Know whether your loan is a term loan or a revolving line, watch how the final rules land after August 28, and — as always — treat easy, refreshing credit with respect. A healthy CIBIL score and a clear repayment plan matter far more than how flexible your loan is. Planning EMIs on a term loan instead? Our EMI calculator can help you see the real cost.

So the humble draw-repay-redraw loan — a product most of us never think twice about — just became the centre of a ₹55,000 crore market story. It's a neat reminder that in finance, the boring plumbing of how a loan is structured can matter enormously to the companies that sell it and the people who use it.

What's your take — is curbing flexi credit a sensible guardrail, or is the RBI taking away a genuinely useful product? This article is educational and based on reported facts as of publication; verify the latest RBI guidelines with official sources.